Thursday, 4 October 2007

What price for bread?

Tymat’s (Leftist Assembly for Change— Lebanon) has an article by Adnan Hajj on the price rises during the Muslim holy month of Ramadan. Below is an edited translation, the original in Arabic can be found on their website.

“This year Ramadan comes against a background of continuing political and economic crises, and amid the wave of inflation—in recent weeks prices have risen by over 15%.

“The month of fasting also coincided with a growing bread crisis. This is due to the global rise in wheat prices, a curb on imports and low stocks of flour.

“Compounding this is a rise in the price of diesel fuel for heating. With the advent of winter, this will hit the poorest hardest, especially in the mountainous and remote areas.

“These extra burdens come at bad time of year for most families with the start of the new academic year. School costs, including textbooks, have risen 20 percent.

“This fact has increased the burden of living of families and is compounded by the rise in unemployment, a the drop in social benefits and in the health insurance fund (the social safety net for Lebanon’s poor).

"The painful facts can be summarised as follows:
Prices of vegetables and potatoes have risen by more than 55 percent in recent weeks, making the cost of an Iftar meal for family of four about 5000LL (£2,50), without counting the cost of a bag of bread (1500LL).

"The quantities of flour available to the mills is only sufficient for ten days.

"The price of a kilo of lamb rose from 12,000LL (£6) to 20,000LL, and beef from 8,000LL to 12,000LL. The price of chicken has risen between 20 percent and 25 percent.

"The prices of milk products have risen 40 percent, while medicine has rocketed more than 15% in two months."

What causes inflation?

In an analysis of the causes of inflation Anindya Bhattacharyya writes in Socialist Worker:

During a period of growth, bosses compete to invest where they think they can make a profit. Typically this involves different capitalists all trying to buy the same raw materials – thus driving up their price.

This price rise eats into their profits, so they respond by raising the prices of the commodities they produce. The effect is to pass the costs on to other capitalists, who in turn raise their prices, all the way down the chain to commodities bought by ordinary people.

Wage rises are a secondary effect of inflation. As inflation kicks in, workers start to notice that their pay packets do not stretch as far as they used to. This in turn leads them to demand pay rises from their employers.

Employers do not want to give their workers pay rises, but can be forced to do so through industrial action, or to head off a threat of industrial action. In certain circumstances, they may have to compete for scarce labour, which again raises wages.

A rising wage bill once more eats into profits, which can be yet another excuse for bosses to raise prices. But the overall reason for inflation is always the drive to keep profit rates up, not the "greed" of workers trying to make ends meet in a climate of rising prices.

If the economy could be planned, then in theory these kinds of vicious circles could be ironed out. But that would involve the interests of businesses being subordinated to the interests of the people.

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